Economy faces some welcome changes

By Huang Tien-lin 黃天麟 /

Fri, Feb 09, 2018 - Page 8

Political and military developments in East Asia, such as North Korea’s acquisition of nuclear weapons, South Korean President Moon Jae-in’s reconciliation with Chinese President Xi Jinping (習近平) in December last year and Philippines President Rodrigo Duterte’s tirades against the US, have made Taiwan the US’ most important regional ally.

Likewise, recent economic developments have been working in Taiwan’s favor. Taiwanese might not have noticed, but Taiwan’s economic structure has been undergoing two kinds of welcome adjustments.

The first is the normalization and upgrading of Taiwan’s tourism industry. One of the nation’s main features is its pristine mountains and clear lakes and rivers, but the flood of Chinese tourists between 2008 and 2016 caused this precious resource to lose its luster.

Some time ago, I went with my family to Sun Moon Lake (日月潭), but was disappointed to find that it was as murky as a harbor. The loss of the lake’s beautiful transparency must have been caused by humans.

Since President Tsai Ing-wen (蔡英文) and her administration have not accepted the “one China principle,” Beijing has exacted retribution by restricting the number of Chinese tourists coming to Taiwan.

This has drawn bitter complaints from companies that cater to Chinese tourists, but it is a blessing in disguise. Despite the sharp drop in Chinese tourists, it has had no effect on Taiwan’s economy — the nation’s GDP has grown every quarter. It has also given well-known tourist spots an opportunity to recover.

Taiwan has broken free from the Chinese tourist market — a tool that Beijing uses to promote unification — and is moving toward normality.

The second adjustment involves improvements to the nation’s economic structure. The economy over the past year and a half has been shifting away from the longstanding policy of seeing China as its only market.

Most Taiwanese would agree that the policy of opening up trade, travel and other relations with China that started in 2000, and the economic integration policy of former president Ma Ying-jeou’s (馬英九) administration — exemplified by the cross-strait Economic Cooperation Framework Agreement — hollowed out the nation’s economy and led to salary stagnation.

When Tsai took office, her administration launched its New Southbound Policy, which aims to open up Southeast Asian and other Asian markets. Whether this reorientation can succeed remains to be seen, but it is a move in the right direction.

On Jan. 23, US President Donald Trump showed his determination to pursue “fair” trade when he fired the first shot in a trade war that invoked Section 301 of the US Trade Act of 1974 to impose heavy tariffs on imported solar panels and washing machines. Last year, China’s trade surplus with the US climbed to US$275.8 billion, which added fuel to the flames.

Since a big portion of China’s trade surplus with the US consists of goods made by Taiwanese-owned companies, a US-China trade war would be a challenge for those companies.

Taiwan’s exports and overall economy might also be affected, but the government can leverage this pressure from the US to gradually adjust the nation’s model of taking orders in Taiwan and making the goods in China — a model that has undermined the nation’s economic structure — in favor of something more normal.